By Goh Wei Liang
Liew Chin Tong’s article *Five Ways to Save the Malaysian Economy* (FMT, Aug 14) is good but the recommendations are flawed, if not full of rhetoric.
Let’s talk about numbers and not play with politics or emotions, because we lose our ability to make rational judgment or decisions when we become emotional.
After my first article, Are Malaysians Now Currency Experts? (FMT, Aug 12) I have been labelled with all sorts of profanities when in fact the key message was Malaysia is not the only country that weakened against the US Dollar. There are multiple factors for the weaker ringgit and the most obvious factor is commodities prices – oil, palm oil and rubber – that crashed from their respective highs in 2011.
Chin Tong’s recipe starts with (1) Get Najib to quit as Prime Minister and (2) Name a new and competent Finance Minister
Let’s evaluate how the government handled this crisis. Leave aside 1MDB for now.
In a letter dated Dec 26, 2014, the government ordered all departments, statutory bodies, government-linked companies and GICs to adhere to the following:
“.. syarikat milik dan berkaitan Kerajaan serta badan berkanun dan syarikat subsidiarinya perlu memberi keutaman kepada pelaburan domestik serta menangguhkan serta merta pembelian aset di luar negara bagi mengurangkan pengaliran keluar dana”
The government knew what was coming. Indicators were clear, especially from the crash in commodity prices.
Three weeks later, on Jan 19, 2015, the Prime Minister, Treasurer General and Governor of the central bank addressed the nation, analysts and media. The government slashed operating expenditure and announced new measures to continue to boost the domestic economy.
As a result, look at our Q1 and Q2 GDP figures. Our economy grew at 5.6% in the first quarter, 4.9% in the second quarter. Malaysia performed better than many other economies and we beat analysts’ forecasts.
What would Chin Tong have done differently?
If there’s something I’m unhappy about, it is the fact that some GLCs clearly ignored the Treasury instruction and are actively scouting for, if not buying, properties and companies to acquire overseas. This puts pressure on the ringgit. Where’s the whip? I blame this on the weak leadership.
Chin Tong’s third point is to set Goods & Services Tax at Zero Rate
GST is expected to contribute RM23.3 billion to the government. But we have abolished Sales & Services Tax, which provided RM17.2 billion last year. We have also reduced both individual and corporate tax rates which will cost us perhaps RM1bil-RM2bil in revenue.
We can expect lower revenue, of approximately RM27 billion, from the oil and gas sector.
Setting GST to zero will cause the Government to be short of close to RM70 bil for the 2016 Budget and years to come if commodity prices stay at current levels. Why make populist but irresponsible recommendations like this?
Chin Tong’s fourth point is to halt big ticket crony projects.
I am shocked that he wants the government to halt projects such as the Malaysia-Singapore high speed rail and mass rapid transit. We all thought Liew wanted better public transport.
Of course, if the government cancels these projects meant for the people, it would be additional political capital for Chin Tong who can then accuse the government of wasting money on compensation payments and also accuse the government of not doing enough to improve public transport.
By the way, which crony was awarded or won the contracts unfairly in both the projects, High Speed Rail and MRT?
Chin Tong says there are other ways to boost the economy. If not infrastructure, what are they?
His fifth point is to halt intake of unskilled foreign labour. I like his recommendation that Malaysia must reduce foreign labour and push for mechanisation and automation. But 70% of foreign labour work as maids, or in plantations, construction, agriculture and services. Approximately 30% in manufacturing.
The government has tried to limit the intake of foreign labour in 2010 to 2013 and encouraged automation in both plantations and manufacturing such as rubber gloves. The government communicates and works closely with the industries all the time and even gave incentives and organized international competitions just to source for ideas from the best.
But there are multiple factors that put off automation efforts especially terrain and costs. And we can’t automate and mechanise maids, builders, or farmers, can we?
These are not excuses but innovation, mechanisation and automation are long term policies and they are already on the table.
Does Chin Tong have any better ideas?